What Crisis? Global Lessons from Norway for Managing Energy-Based Economies
Provincial governments across Canada are currently feeling the pinch as plummeting oil prices put a strain on budgets. The federal government has taken the unusual step of delaying its budget. Alberta, after violently resisting for decades, even floated the idea of introducing a provincial sales tax.
This volatility would not be nearly as pronounced if Canadian governments had followed Norway in establishing an investment fund. Energy development also plays an important role in Norway but, in contrast to Canada, it has no plans to radically change its budget as a result of the oil crisis. In fact, it has a budgetary buffer of $8.5 billion.
The difference is that, 25 years ago, Norway created a sovereign wealth fund to capture its oil revenues and remove them from general government revenues.
This takes away the temptation for free-spending politicians to use an ephemeral benefit – revenue from natural resources – to plug holes in government budgets brought on by swings in the economy or over-spending.
This report begins with a stark reminder of the impact of the current fall of oil prices on oil economies within Canada and abroad, and contrasts this with the situation in Norway. Next is an overview of what sovereign wealth funds are and the different policy goals they serve. The paper then outlines the path to the development of the most successful sovereign wealth fund in the world, Norway’s Government Pension Fund Global. Finally, it outlines policy directions the resource-producing provinces and territories, as well as Canada, should follow to produce sustainable, prosperous futures based on a cornerstone of natural resource wealth.
Click on the following to access the full report: http://www.macdonaldlaurier.ca/files/pdf/MLICommentaryPoelzer02-15-V7-WebReady.pdf
Greg M. Poelzer
Executive Chair, ICNGD and Fulbright Arctic Initiative Scholar
Greg Poelzer is the Founding Director and Executive Chair
of the University of Saskatchewan International Centre for
Northern Governance and Development (ICNGD) and current Fulbright Arctic Initiative scholar. Greg is also the former Dean of Undergraduate Studies at the University of the Arctic and currently leads the UArctic Thematic Network on Northern Governance. His research focuses on comparative politics and policy as it relates to northern regions and to Aboriginal-state relations.